Naspers’ PayU buys Citrus Pay for $130M in cash to expand in India

Hundreds of millions of dollars of investment have been put into commerce startups in the fast-growing market of India, from marketplaces like Flipkart and Snapdeal through to payment startups like PayTM. Now one of the more interesting of these has been acquired. PayU, an online payments company with a focus on developing markets that is owned by South Africa’s Naspers, has acquired India’s Citrus Pay for $130 million in cash, in what the companies say is the largest cash exit for a payments company in India to date.

The deal, which will close in Q3, will create a larger footprint for PayU in India with over 30 million customers and projected to process 150 million transactions in 2016 worth $4.2 billion. Today, both companies offer digital wallet services — essentially a way of topping up and spending money online and on mobile for people who may not have payment cards — and payment services for online and in-store merchants. The combined company will use this to compete better with others like PayTM, which is the largest payments and mobile wallet provider in the country.

It’s a much smaller sum but still a good exit for Citrus Pay, which had raised around $32 million from investors that include Sequoia, Ascent Capital and eContext.

PayU itself got its start in India but is now active across 16 markets as Naspers — which both makes strategic startup investments (including in India) and acquisitions to augment its own media and digital business — used its acquisition of PayU in 2014 to consolidate its payments businesses across several other markets.

Citrus Pay and PayU today cover a lot of the same kinds of services, but it looks like the combined operation will be a lever to expand into more offering around banking and other services. Like PayTM and rival services from e-commerce giants like FlipKart and Snapdeal as well as other big global players like PayPal, all of these companies are tapping into the fact that there is low credit card and bank account penetration in the country, and yet the appetite to buy things online and in person is growing, thanks to an expanding middle class and the growth of smartphone penetration to make transactions.

Boston Consulting Group estimates that digital transactions will hit $500 billion by 2020, representing tenfold growth in the next four years.

As part of the deal, Amrish Rau, Citrus Pay MD, becomes CEO of PayU in India reporting to PayU Global CEO, Laurent le Moal. PayU cofounder Shailaz Nag will focus on new services and bank partnerships; Citrus Pay founder Jitendra Gupta will head up the merged company’s credit business (currently called LazyPay at Citrus). Meanwhile the other PayU cofounder Nitin Gupta, will help with the transition before leaving PayU.

“Today’s announcement is a significant milestone for both businesses, as well as the fintech industry in India,” said Laurent le Moal, CEO of PayU. “It is exciting for everyone across the PayU and Citrus teams as we bring together new capabilities that will help us to better serve our collective clients.”